Senate Passes Flood Bill

The Senate Thursday overwhelmingly passed and sent to the House legislation that would effectively delay for up to four years implementation of flood insurance premium rate hikes imposed by a 2012 law. The vote was 67-32.

The National Flood Insurance Program has more than 5.6 million subscribers. The Senate acted under tremendous pressure of the unintended consequences of the Biggert-Waters Act of 2012, which mandated imposition of actuarial rates for the NFIP over four years.

Sen. Heidi Heitkamp (D-N.D.) cited the case of one woman homeowner in her state whose $60,000 NFIP policy was going to rise from the current $625 to $10,600 in one fell swoop.

NAFCU was also a strong supporter of the bill. “The Senate’s adoption of S. 1926, introduced by Senator Robert Menendez (D-N.J.) is a welcome development for homeowners who without this legislation would potentially face huge jumps in flood insurance premiums,” said Dan Berger, NAFCU president/CEO.

He said NAFCU supports a delay in implementing rate increases until such time that further study can be done to address how a reasonable flood insurance program can be sustained.

“We hope that this legislation can be advanced in a timely manner,” he added.

However, it is unlikely the Senate bill will pass the House in its present form, and there is some question how quickly the House will even act on any legislation ameliorating the rate hikes, even though bills implementing the new rates have been going out since last October.

Even the Consumer Federation of America voiced opposition, as did officials of the National Association of Mutual Insurance Companies and the Property Casualty Insurers Association of America.

One congressional observer predicted that the House “will drag its feet for a while, and it's likely the Senate bill is first taken up through a hearing before the House Financial Services Committee.”

Ray Lehmann, a fellow at the R Street Institute in Washington even doubted that the Senate bill get a vote in the House, even though the bill has 185 co-sponsors in the House.

“If a bill makes it to the House floor, it will look like the amendment sponsored by Sen. Pat Toomey (R-Pa.),” he said.

That amendment was defeated by the Senate, 65-34.

The Toomey Amendment would cap annual rate hikes at 25% annually and pay for it by imposing a $40 on each NFIP policy, except for those with incomes about $500,000 who can pay up to $80 annually.

Toomey said in a statement that, “This ensures that subsidies in the program are paid for within the program, protecting the majority of taxpayers who do not live in flood zones.”

The Senate bill is S. 1926, the Homeowner Flood Insurance Affordability Act of 2014 and National Association of Registered Agents and Brokers Reform Act of 2014.

The bill would prevent flood insurance rate increases until the Federal Emergency Management Agency’s mapping methods are certified as technically sound and an affordability study is completed. It would also keep in place phase-out of subsidized flood insurance premiums for vacation homes and homes that have a history of repeated flooding.

The Senate rejected any amendments to the bill, including one that would amend the definition of “private flood insurance” in the 2012 Biggert-Waters Act that the latest bill seeks to amend by restoring the discretion necessary to allow lenders, private insurers, and regulators to develop a functional private insurance market.

States and courts have been clamping down on the cost of force-placed insurance, with class action lawsuits and actions against mortgage servicers by state insurance regulators, especially in California, New York and Florida, and the decision indicated that there was little support for further federal regulation of this product.

Opponents noted that the Consumer Financial Protection Bureau had already been given authority under the Dodd-Frank Act to police this insurance product.

“Literally thousands, tens of thousands of Americans will lose their homes, middle class Americans, working class Americans, poor Americans, if we don’t pass this legislation,” Sen. Chuck Schumer (D-N.Y.) said on the Senate floor Thursday in urging support for the bill.